E Suhail Ahmed, Partner TRIALBASE, Advocates &
Legal Consultant- RERA Consultants LLP
In view of the Covid-19 related lock down and social distancing
requirements and the continuing scenario due to the pandemic, the question of continuation of functioning of Apartment Owners Association formed either under the Karnataka Societies Registration Act 1960 (KSRA) or under the Karnataka Apartment Ownership Act 1972(KAOA), with the calendar year of the Associations coming to an end, the requirement of conducting AGM’s and the question whether such AGMs can be conducted online, is a question that arises.
With this background, we can discuss this with respect to Associations both
under KSR Act 1960 and KAOA 1972.
In case of Welfare Associations registered under the Karnataka Societies
Registration Act 1960, it would become necessary to consider the provisions under the Act regarding conduct of the meetings. Section 11 KSR deals with the General Meetings reads as under:
“Section 11: General meeting.- (1) Every society registered under this Act
shall hold every year a general meeting called the annual general meeting at which the report of the management of the society for the previous year together with an audited copy of the balance sheet, income and expenditure account and the auditor’s report shall be submitted for approval.
(2) The first annual general meeting shall be held by a society within eighteen months of its registration. The next annual general meeting of the society shall be held within nine months after the expiry of the 1 [x x x]1 year in which the first annual general meeting was held; and thereafter an annual general meeting shall be held within nine months after the expiry of each 1 [x x x]1 year: 1.
Provided that the Registrar may, for any special reason, extend the time within which an annual general meeting shall be held, by a further period not exceeding six months:
Provided further that except in the case referred to in the preceding proviso not more than eighteen months shall be held by a further period not exceeding six months.
3) A special meeting may be convened at any time on the requisition of the
president or the chairman, if any, of the governing body or on the requisition of not less than one third of the total number of members of the governing body or one tenth of the total number of members of the society, entitled to vote who shall state in writing the business for which they wish the meeting to be convened and the governing body shall, within ten days from the date of the receipt of the requisition, proceed duly to call a meeting for the consideration of the business stated on a day not later than forty days from the date of the receipt of the requisition.
4) If a member has no registered address in India and has not supplied to the Society an address within India for the giving of notice to him, a notice advertised in a news paper in Kannada and in newspaper in English or any other language circulating in the neighborhood of the registered office of the society shall be deemed to be duly given to him on the day on which the advertisement appears in the newspaper.”
Other than stipulating time as to when the meeting should be held, no other
condition is stipulated under the above provision, as to the place where the
meeting should be held. It is further required to be taken into consideration the fact that the KSR ACT was enacted way back in the year 1960, at which point of time the advancement of technology and possibility of holding meeting online in the manner that is possible as of today could not have been foreseen. In view of the recent developments and also Covid-19 lock down, the government has also not issued any clarification or circular with regard to conduct of AGM’s online. In the given scenario, what would become necessary is to consider whether an AGM conducted online would be valid by taking into consideration the circulars and directions issued under other Acts issued by the other departments.
The Ministry of Corporate Affairs has issued a circular bearing No. 14/20 dated 08.04.2020 clarifying the method in which a Company can hold an AGM online, including the method of e-voting. The said circular was also adopted for conducting AGM’s by Companies, thus enabling the possibility of conducting AGMs through video conferencing. Since the calendar year has come to an end and it becomes necessary for the AGM’s of Apartment Owners Associations which are registered under the Karnataka Societies Registration Act 1960, have to be held in order to continue with the
smooth functioning of the Associations and also to place the relevant reports before the general body. Unless the Rules and Regulations of a society mandate that the AGM has to be held at a particular place with the members being present physically, there being no restriction under the Statute governing the Association/Society, an AGM can be conducted through video conferencing and subsequently the proceedings of the AGM can be validated by the office bearers and members by circulating the documents and obtaining their signatures on the mandatory documents.
As regards an Association that is formed under the Karnataka Apartment
Ownership Act 1972 with the execution of a Deed of Declaration and submission of byelaws to the registrar of Cooperative Societies, unless there is a specific bar under the Byelaws to conduct the AGM through video conferencing and as such there is no prohibition under the Karnataka Apartment Ownership Act 1972 or the Rules framed thereunder.
Rule 13 of KAOA specifies the place of meeting and states that the meeting
of the Association shall be held at a suitable place convenient to all the owners, as may, from time to time designated by the Association.
In view of the said Rule since what is stated that the meeting is to be held at
suitable place convenient to the owners, it cannot be said that there is a prohibition to conduct the meeting through video conferencing. While the AGM can be conducted online, the byelaws of the Association may stipulate that the meetings of the Association shall be held at the registered office. In view of the present existing circumstances, social distancing norms have to be maintained and further due to the fact many members may not be able to physically attend the AGM, with the consent of the General Body, AGMs can be held through video conferencing and the business of the Association can be carried out. While the Ministry of Corporate Affairs having allowed AGM of Companies itself being held through video conferencing and given the fact that Companies are business entities for profit and further given the fact that during the AGM, all the financial reports of the Companies are to be placed before the Board and shareholders, since the Associations formed for the purpose of carrying out the maintenance activities in
an apartment complex and such associations being non-profit organizations, the AGM of such a body can be held through video conferencing.
As regards elections, if the byelaws would require that the e-voting should
happen by casting votes by physical ballots in which case, with the consensus of all the members of the Association, e-voting can be undertaken as has been permitted in case of Companies under the circular referred to above.
CONCLUSION:
Covid-19 pandemic has been declared as a force majeure event by the Government and even Limitation under Section 4 of The Limitation Act has been extended by the Hon’ble Supreme Court. The Hon’ble Supreme Court and High Courts have even started conducting legal proceedings through video conferencing thus accepting the requirement of carrying forward with the necessary activities with the aid of the modern technology. Hence, in view of the above, it can be concluded that the AGM’s of Associations can be conducted through video conferencing with the consensus of all the members by following due procedure to obtain such consensus and also signatures of the office bearers on the relevant documents can be obtained
physically. Further, such Associations can specify the reason for conduct of such virtual AGM’s and record/store such proceedings and further follow all the requirements under the applicable statutes.
DISCLAIMER:
This article is the opinion of the Author and it is recommended that Associations seek assistance of professional/s in case of any specific queries, clarifications with respect to conduct of AGM’s of Associations in accordance with their respective
Rules & Regulations and Bye-Laws.
REFERENCES :
MCA General Circular No. 20 /2O2O dated 5th May 2020:
Clarification on holding of annual general meeting (AGM) through video
conferencing (VC) or other audio visual means (OAVM).
http://ficci.in/sector/report/20960/MCA-AGM.pdf
MCA General Circular No. 18/2020 dated 21st April 2020:
Holding of annual general meetings by companies whose financial year has ended on 31st December, 2019.
http://ficci.in/sector/report/20806/MCA-Circular_21-Apr_extension.pdf
MCA General Circular No. 17/2020 dated 13.04.2020 (EGM Circular – ll):
Deals with conduct of extraordinary general meeting (EGM)
http://ficci.in/sector/report/20667/MCA-Circular_13Apr_clarification.pdf
MCA General Circular No. 1412020, dated 08.04.2020 (EGM Circular – l):
Passing of Ordinary & Special resolutions via registered email ids.
http://ficci.in/sector/report/20630/MCA-Circular_EGM_08042020.pdf
Supreme Court Notifications, Circulars & Guidelines on conduct of Virtual
Hearings :
https://main.sci.gov.in/pdf/LU/16052020_123951.pdf
https://main.sci.gov.in/pdf/cir/17042020_103200.pdf
https://main.sci.gov.in/pdf/cir/23032020_153213.pdf
https://main.sci.gov.in/pdf/cir/26032020_134544.pdf
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